PEI has denied it conspired to undermine the economic interests of a U.S.-based technology company that was involved in the province's ill-fated attempt to become an international online gambling hub.

Capital Markets Technologies filed a $25-million lawsuit last week alleging breach of contract and conspiracy. The lawsuit was filed three days after Premier Wade MacLauchlan launched an election campaign in which the failed eGaming initiative has figured prominently. On Monday, Conservative Leader Rob Lantz called on the province to release all documents related to the venture.

Earlier this year, The Globe and Mail reported on a covert plan to transform Canada's smallest province into a global eGaming capital. The story revealed lax oversight and weak conflict-of-interest rules that enabled government officials to invest personally in companies that were working on the project.

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Only hours after the 55-page claim was filed, the government released its statement of defence denying all the allegations, none of which have been proven in court.

"It just doesn't hold together in law," said Jonathan Coady, the Charlottetown lawyer handling the case on behalf of the province. "There is no legal merit to the claim. … The defence is clear, detailed and provable."

The lawsuit named the province and several current and former government officials, including recently resigned finance minister Wes Sheridan and former premier Robert Ghiz's one-time chief of staff Chris LeClair.

John Findlay, the lawyer representing Capital Markets Technologies, said the province's rebuttal seems more concerned with salvaging the Liberals' political reputation during an election campaign than responding to the accusations.

"It's really just a general denial," Mr. Findlay said. "It seemed to have more political overtones than legal overtones."

Capital Markets Technologies is central to the strange and complex story of Prince Edward Island's gambling venture. CMT is based in the United States, but since 2010, it has operated a local PEI subsidiary that has gone by three different names — Financial Markets Technologies, Trinity Bay Technologies, and 7645686 (its legal name). Furthermore, CMT was a part-owner of a U.K.-based business called Simplex, which ran a high-level financial platform used by banks.

PEI worked with Simplex on the eGaming file. A Globe and Mail investigation revealed earlier this year that the connection was formed through CMT, and the two companies maintained a close relationship. The gaming plan fell apart in February, 2012, and the province signed a memorandum of understanding (MOU) with CMT's subsidiary to work on bringing the financial platform to the island. But the 90-day period covered by the agreement ended without a deal.

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In his lawsuit, CMT executive Paul Maines alleges that shortly after the MOU expired, Mr. Sheridan and Mr. LeClair made a pitch to PEI's economic development wing to proceed with the financial platform with a different company.

The province denies this. In its defence, the government says the MOU fell apart because CMT's subsidiary did not provide adequate information.

The extent to which Mr. Maines and CMT played a role in the online gambling initiative will be central to the case, even though the lawsuit stems from the fallout over the failed MOU. The province's position is that it had no idea CMT was connected to that agreement. The statement of defence reads: "CMT was not a party to the MOU; there was no understanding or relationship of any kind between the government and CMT."

Mr. Maines's lawyer, Mr. Findlay, will have to prove that, given the number of years eGaming was in the planning stages, there is no way the government could not have realized it was dealing with the same group of people.

"On its face, I find that hard to believe. The relationships were all there. They all knew who everybody was," Mr. Findlay said.

Mr. Findlay promised a reply to the government's defence in the next two weeks. From there, it will go to discovery. PEI voters head to the polls on May 4.